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Narrow server farm vote shows legislative rift on tax breaks

LANSING (AP) — A razor-thin legislative vote on tax breaks for a Grand Rapids-area data center could portend problems for other companies or industries hoping to secure incentives to stay in or expand into Michigan.
In the Republican-led Legislature’s final days of voting this year, it was not a major expansion of gambling or the restoration of budget vetoes that drew the most debate.
Instead, a deeply divided House spent more than an hour debating and passing, by the slimmest of margins after some arm-twisting, a bill that would give additional tax exemptions to Switch.
The Las Vegas-based company opened a mega-campus of computer servers in suburban Grand Rapids in 2017, after Michigan exempted it and “co-located” clients from sales, use and business equipment taxes. Switch also was freed of many property taxes under a 2016 agreement.
The legislation would clarify that Switch is exempt from certain school taxes it was assessed for the first time about a year ago. Switch has conceded that the deal as written clearly does not abate some taxes but has said the levies run counter to its “understanding” of the agreement with the state, Kent County and Gaines Township.
The bill sparked contention in the House, where it passed 55-53 on Wednesday, even after Switch and two school districts worked out their differences.
The Senate, which passed a different version of the measure in September, adjourned for the year without voting.
The legislation may ultimately be signed into law. But the controversy surrounding it is more evidence of the difficulty facing lawmakers and economic development officials who still want such incentives after the state previously cut business taxes.
Michigan’s $200 million “Good Jobs” program, which is used to attract large-scale business expansions, will expire at the end of December after the Senate declined to vote to renew it and raise the cap to $500 million.
Companies keep all or half of the income taxes if they create new jobs paying at least the regional average.
The incentives helped to entice Fiat Chrysler to build an assembly plant in Detroit and drug maker Pfizer to add a manufacturing plant in the Kalamazoo area.